Break-even occupancy calculator
Break-even occupancy is the share of potential revenue a facility must collect to pay its bills. Check it before and after debt service, and compare it with where the facility is today.
- Operating only
- 37.7%Covers operating expenses
- With debt service
- 82.2%$203,552 / yr debt service
- Today, economic
- 82.0%Collected ÷ potential revenue
- Cushion
- −0.2 ptsAbove break-even
- Potential revenue
- $471KAll units + other income
- Revenue needed
- $376KCollected, per year
Break-even moves as rents rise. Storage Underwriter recalculates it with your P&L, loans and lease-up on every deal you save.
iPhone app · coming soon →The formula
This is the same break-even formula the Storage Underwriter app reports for each deal, with potential revenue measured at in-place rents.
Worked example
The calculator opens on a 380-unit facility at $98 average rent with $24,000 of other income, 3% collection loss and $172,000 of operating expenses. Potential revenue is $470,880.
| Annual cost | Break-even | |
|---|---|---|
| Operating only | $172,000 | 37.7% |
| + amortizing debt service | $375,552 | 82.2% |
| + interest-only debt service | $340,000 | 74.4% |
Today the facility collects about 82.0% of its potential revenue (318 of 380 units rented, less collection loss). On amortizing debt it sits right at break-even, with no margin for a bad quarter. On interest-only terms the cushion is about 7.5 points. Operationally the facility is safe; the financing is what makes it fragile. That is the kind of result to take to the loan calculator before you commit to leverage.
How to use it in underwriting
- Compare against economic occupancy, not just units rented. Physical vs. economic occupancy explains the difference.
- Run it on year-1 numbers, including a reassessed property tax bill and the interest-only or amortizing payment you will actually make.
- Stress it: raise collection loss or cut average rent to see how quickly the cushion disappears.
Results are estimates based entirely on the figures you enter. They are not investment, lending, tax or legal advice.
Questions
What is break-even occupancy?
The occupancy at which collected revenue equals operating expenses (operating break-even), or operating expenses plus debt service (levered break-even). Below it, the facility loses money before or after its loan payments.
How do you calculate break-even occupancy?
Divide the revenue you need (operating expenses, plus debt service for the levered figure) by potential revenue after collection loss. Potential revenue is every unit rented at its rent for a year, plus other income. With $172,000 of expenses and $203,552 of debt service against $470,880 of potential revenue and 3% collection loss, levered break-even is 82.2%.
Is break-even occupancy physical or economic?
This calculation compares collected revenue with potential revenue, so it is an economic measure. Compare it with economic occupancy (collected revenue divided by potential revenue), not only with the share of units rented. A facility full of discounted or delinquent units can be above break-even physically and below it economically.
What is a good break-even occupancy?
Lower is safer. What matters is the cushion between break-even and the occupancy the facility can reliably sustain in its market, especially in a downturn or when new supply opens nearby. The Deal Analyzer flags deals whose year-1 coverage falls below 1.0x.
Related
- Physical vs. Economic OccupancyUnit, square-foot and economic occupancy, and why the gap between them matters.
- DSCR & Loan SizingPayments, DSCR and debt yield, the maximum loan each lender test allows, and a seller second.
- NOI & Expense RatioBuild NOI from rents, ancillary income and a quick expense ratio or a line-item P&L.
- Lease-Up & StabilizationMonth-by-month occupancy, rent and NOI from today to a stabilized facility.
- Deal AnalyzerFull acquisition underwriting: unit mix, lease-up, NOI bridge, debt, IRR and a sensitivity grid.